The Organization for Economic Cooperation and Development (OECD) has joined enforcement agencies in the U.S. and across the globe in warning of bribery and corruption risks in connection with the COVID-19 pandemic. The worldwide outbreak has created unprecedented demand for products and services in the medical device and healthcare industries, as well as many others, which, coupled with new severe financial pressures on companies, is likely to create incentives for corrupt practices. At the same time, corporate compliance departments might also struggle to monitor their employees who are working remotely, leading to lapses in otherwise functional compliance programs.
Forecasting a resulting rise in bribery and corruption in the coming months, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) have warned companies that federal prosecuting agencies are not on vacation during the lockdown and will be pursuing new investigations despite logistical difficulties. Robert Dodge of the SEC's FCPA unit has warned that the COVID-19 outbreak does not give companies a pass for violations: "Nothing has been put on hold…. It's not that the rules no longer apply; the rules very much apply." David Fuhr, an assistant chief of the U.S. Justice Department's FCPA Unit, confirmed DOJ would continue to investigate bribery violations, "Reporting and detecting misconduct continue to be very important things for companies to do… compliance has to continue."
U.S. FCPA and Global Anti-Corruption Laws
In the COVID-19 era, prosecutors will rely, in large part, on the same enforcement tools they have traditionally used to combat bribery and corruption around the globe. In the United States, the Foreign Corrupt Practices Act (FCPA) is the primary tool enforcement agencies use to police bribery and corruption. The anti-bribery provisions of the FCPA prohibit the offer or payment of anything of value to a foreign official to obtain or retain business. While the FCPA does not specifically criminalize so-called corporate bribery, U.S. anti-money laundering laws (18 U.S.C. §§ 1956-57), the Travel Act (18 U.S. Code § 1952), mail and wire fraud (18 U.S.C. §§ 1341, 1343), and securities laws provide for civil and criminal penalties for bribery in both the public and private spheres. Other international anti-bribery statutes, including the UK Bribery Act (UK), Sapin II (France), and the Anti-Unfair Competition Law (PRC), criminalize foreign and domestic bribery of both public officials and private corporate employees and may be applicable, depending on a company's operations.
Elevated Corruption Risks Due to COVID-19
Several FCPA issues can be expected during the COVID-19 crisis and its aftermath. The exigent circumstances caused by the pandemic and a near-national lockdown have put increased pressure on companies to raise operating revenue and procure in-demand supplies. The healthcare and life sciences sectors are at particular risk for FCPA violations as governments and companies scramble to quickly obtain scarce commodities like PPE cross-border.
Shifts in Supply Chains
As factories around the globe remain closed in an attempt to curtail the spread of COVID-19, many multinational companies will struggle to rely on their traditional sources of raw materials, goods, and labor. These companies may respond by purchasing from new suppliers and using unvetted agents. As companies scramble to procure materials and reduce negative impacts on revenue, normal due diligence practices need to be retooled to adapt to the new circumstances.
Essential Businesses and Plans to Reopen
Most countries have imposed heightened restrictions on businesses that could operate normally during the COVID-19 pandemic. Each jurisdiction has its own guidelines to delineate which businesses are "essential" and may remain open, and which are "non-essential." As jurisdictions start to reopen, state and local officials also must decide which businesses should be given priority in a tiered reopening framework. Given the significant financial impact of being deemed non-essential and remaining closed, there is a risk of corruption and bribery to potentially improperly influence government officials in order to receive a favorable status. Corrupt government officials may also insist on a bribe to provide that favorable status.
Customs Controls
Companies that interact with customs agents face a heightened risk of FCPA violations, especially when they are pressured to quickly obtain goods to mitigate the healthcare and economic damage caused by COVID-19. As some governments tighten their border controls in response to the pandemic, this is an increasingly difficult task. Corrupt customs officials could capitalize on the urgency and pressure felt by companies by demanding a bribe to allow the export of PPE or other high-demand items.
Advice to Clients
Companies should ensure compliance programs are tailored to address the particular risks of their business, and the additional risks created by COVID-19. This means companies should ensure their anti-corruption compliance resources are appropriately allocated to respond to current business environment. For instance, compliance program employees responsible for monitoring gifts, travel, hospitality, and entertainment expenses will likely have decreased workloads because of the global downturn in business travel and conferences. Such employees may be needed, however, to review new procurement contracts, perform due diligence on new agents and business partners, and look for anomalies in expense accounts and margins on transactions in high-risk jurisdictions.
Scandals that occur during the height of the COVID-19 pandemic will likely attract heightened attention from the media, political figures, regulators, and prosecutors. Mr. Dodge of the SEC and David Fuhr, an assistant chief of the DOJ's anti-foreign-bribery unit, urged companies to "communicate with [them] . . . quickly and completely" in disclosing discovered misconduct.
Venable's Investigations and White Collar Defense Practice Group can advise you about conducting your business in compliance with foreign and domestic corruption and bribery laws during this unprecedented time. They have years of experience representing corporations and individuals at every stage of criminal investigations, including responding to grand jury subpoenas and search warrants.